Question

Goehler, Inc. acquires all of the voting stock of Kenneth, Inc. on January 4, 2017, at an amount in excess of Kenneth's fair value. On that date, Kenneth has equipment with a book value of $90,000 and a fair value of $120,000 (10-year remaining life). Goehler has equipment with a book value of $800,000 and a fair value of $1,200,000 (10-year remaining life). On December 31, 2018, Goehler has equipment with a book value of $975,000 but a fair value of $1,350,000 and Kenneth has equipment with a book value of $105,000 but a fair value of $125,000. 18) If Goehler applies the equity method in accounting for Kenneth, what is the consolidated balance for the Equipment account as of December 31, 2018?

Answer 1

$1,104,000

Step-by-step explanation:

The computation of consolidated balance for the Equipment account is shown below:-

Goehler Equipment with a book value $975,000

Kenneth equipment $105,000

Original purchase price allocated

to Kenneth's equipment $30,000

($120,000 - $90,000 )

Allocation for Amortization $6,000

($30,000 × 2) ÷ 10

Consolidated balance for the Equipment $1,104,000

($975,000 + $105,000 + $30,000 - $6,000 )